FTC suing AT&T for data throttling

WASHINGTON — Three years ago, AT&T warned smartphone customers with “unlimited” data plans that their connections might be slowed if they used a lot of data.

The Federal Trade Commission is suing AT&T for allegedly misleading customers by slowing data speeds for wireless customers who had unlimited data plans but went over a certain usage point, the agency announced Tuesday.AT&T is being sued by the government over allegations it misled millions of smartphone customers who were promised unlimited data but had their Internet speeds cut by the company — slowing their ability to open web pages or watch streaming video. Speeds were reduced by as much as 90 percent in some cases, making basic phone functions such as web browsing and watching video almost impossible, the FTC said. “AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” FTC Chairwoman Edith Ramirez said in a statement. “The issue here is simple: ‘unlimited’ means unlimited.” AT&T throttled speeds for 3.5 million customers at least 25 million times, the FTC alleges, while it also said that customers who canceled their contracts due to the lowered speeds still had to pay expensive termination fees, the FTC alleges. “The FTC’s allegations are baseless and have nothing to do with the substance of our network management program,” Watts said. “We have been completely transparent with customers since the very beginning. The suit, filed Tuesday, alleges that AT&T deceived its wireless customers and seeks millions of dollars in refunds for a practice that still continues.

We informed all unlimited data-plan customers via bill notices and a national press release that resulted in nearly 2,000 news stories, well before the program was implemented. Beginning in October 2011, AT&T began restricting the data speeds of unlimited data plan customers who exceeded a monthly usage threshold that initially was as low as 2 gigabytes, the agency said. As evidence of throttling by AT&T and other carriers was accumulating in 2012, AT&T sent me a statement saying that customers with 3G or 4G phones “will see speeds reduced if they use 3GB (gigabytes) of data or more in a billing cycle. Smartphone customers can hit that monthly limit by streaming standard definition video for 10 hours and surfing the Web for 55 hours, according to AT&T’s data calculator. Wireless carriers’ practice of slowing speeds for their heaviest unlimited users has also caught the attention of the Federal Communications Commission. “Wireless customers across the country are complaining that their supposedly ‘unlimited’ data plans are not truly unlimited, because they are being throttled and they have not received appropriate notice,” said an FCC spokesperson Tuesday. “We continue to work on this important issue, including with our partners at the FTC, and we encourage customers to contact the FCC if they are being throttled by AT&T or other cellular providers.”

In late July, FCC Chairman Tom Wheeler wrote a letter to Verizon saying he was “deeply troubled” by the company’s intention to start throttling its heaviest data users. Maurice Turner, of Anaheim, California, complained about a half-dozen times when he started noticing sharply slower speeds loading Google searches or GPS maps. AT&T’s marketing materials emphasized the “unlimited” amount of data that would be available to consumers who signed up for its unlimited plans.

These customers can still use unlimited data and their speeds will be restored with the start of the next billing cycle.” But Ramirez said the notifications were “inadequate and inconspicuous” and did not provide “full and adequate information about the extent of data-throttling and impact on services.” Company focus group research into slowing data above certain thresholds found that consumers “thought the idea was ‘clearly unfair,'” and one participant said it “seems misleading to call it unlimited,” the suit said. Some apps would simply crash on him. “It’s really unfair to have my speed cut down like that,” Turner said in an interview. “It’s unreasonable that only people with unlimited plans are being punished for using the service the way AT&T advertised it.” Turner says he wants the company to honor the original contract for unlimited data service. The complaint alleges that, even as unlimited plan consumers renewed their contracts, the company still failed to inform them of the throttling program. In August, Public Knowledge, a consumer advocacy group, complained to AT&T and the other major wireless providers — Verizon Wireless, Sprint Corp. and T-Mobile US Inc. — that they weren’t clear about when data throttling kicks in.

The FTC has been on something of a roll with wireless regulation lately, including its early-October settlement with AT&T and a July complaint that accused T-Mobile of cramming.